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Acurity annual earnings fall less than expected as subdued demand poses problems

Monday 27th May 2013

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Acurity Health Group, the private hospital operator formerly known as Wakefield Health, reported a smaller decline in annual earnings than forecast, while warning subdued demand for private sector health was making it difficult to keep a lid on costs.

Net profit fell to $5.9 million, or 34 cents per share, in the 12 months ended March 31 from $6 million, or 39 cents, a year earlier, the Wellington-based company said in a statement. Adjusted annual earnings, which strips out the revaluations in interest rate swaps, dropped 6.9 percent to $6.1 million. That was ahead of the 20 percent to 25 percent decline flagged at its first-half result in November.

"The reduction in underlying earnings reflects the continuance of subdued revenue volumes combined with the ongoing difficulties of matching costs to a patchy demand profile and absorption of continually escalating building insurance costs," chairman Alan Isaac said.

The shares last traded at $5.05 on May 22, and had increased 1 percent this year. The stock is rated a 'hold' by Forsyth Barr's Rob Mercer, who has a median target price of $6, according to Reuters data.

The board declared a final dividend of 8 cents per share, payable on June 28 to shareholders on the register on June 21. That takes the annual payment to 14 cents per share, down from 17 cents a year earlier.

Revenue fell 1.1 percent to $79 million as private revenues shrank, and earnings before interest, tax, depreciation and amortisation sank 12 percent to $14.2 million. The biggest increase in costs came from a 50 percent jump in insurance premiums, combined with building work on the Wakefield site, Acurity said.

Employee costs rose 0.7 percent due to an increase in collective agreement rates, while specialist contract costs rose with an increase in work from Accident Compensation Corp and the district health boards.

Acurity's biggest shareholders, the Stewart family and Royston Hospital Trust Board, took control of the company in September, pooling their investments into a joint vehicle called Medusa. Mark Stewart was appointed a director of the company last week.

The company made another pitch for tax breaks on private health insurance, saying New Zealanders would get greater certainty around choice and availability of services if they took greater personal responsibility.

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